Are the KiwiSaver and Working for Families policies as progressive as the Labour Party makes out? The Government heralds such schemes as benefiting the poor, but on closer investigation these policies actually put more resources into the middle-class or even employers, and the desperately poor are once again trodden on by the Labour Party. [Read more below]
Rob Stock’s article entitled ‘KiwiSaver’s poor deal’ in the Money section of the Sunday Star-Times (not currently online) argues that ‘those on lower incomes will miss out on many KiwiSaver benefits'. Stock says that low-income earners will not be able to afford to take part in the scheme, and the government’s subsidies will therefore go towards more wealthy New Zealanders:
‘many lower income families will have little choice but to opt out of KiwiSaver, and miss out on the $1000 new account, subsidy, annual fee subsidies and possibly tax breaks on contributions – all things middle income and rich savers will get, and need far less’.
Stock also points out that KiwiSaver will operate as a subsidy to employers, as it ‘will cost employers about 67c for each dollar they put in because of tax breaks’, and bosses will be able to make sure their ‘contribution is part of the next pay rise they offer people’. This is a point also made by employer adviser, Jonathan Eriksen, writing a business article entitled Employers, it's time to wake up to KiwiSaver. Eriksen celebrates that it gives businesses ‘an opportunity to give a tax-efficient pay rise’: ‘By offering to match an employee's KiwiSaver contributions dollar for dollar up to 4%, you are actually providing a pay rise of up to 6%.’ Mary Holm, the author of Get Rich Slow, has also written an article entitled Tax breaks may favour the wealthy, essentially arguing that ‘those on higher incomes will gain more’, and ‘many of our poorest citizens… will be left out’.
Similarly, the Working for Families scheme is not nearly as progressive as Labour makes out - especially since it only really helps those in stable employment rather than low employment. As John Minto has argued, ‘Working for Families is, in reality, a state subsidy for businesses that pay poverty wages. Both Labour and National prefer to subsidise wage levels with government funding rather than pressure companies to convert high profits to wage increases’.
Susan St John and Steve Poletti of the Economic Department at the University of Auckland have also written a strong leftwing critique of Working for Families – see Plight of most vulnerable unchanged by tax credits. In this, St John and Poletti state that ‘Working for Families has failed miserably by discriminating against the poorest children, leaving us with an intractable child poverty problem’. They say that the Family Tax Credit component is ‘one that goes selectively only to "worthy" families, while being denied to the 250,000 of the poorest children whose parents don't meet the hours of work criteria and independence from the benefit system.’ They also point out that the tax system has worked against the poor due to the Government failing to adjust the thresholds: ‘The lowest tax threshold of 15 per cent for incomes up to $9500 has been unadjusted since 1988, and now should be $18,000’.
All this shows that when Labour’s left-sounding and highly-trumpeted schemes are put under the microscope, they turn out to be rather less radical or redistributive than some would have us believe. Labour is clearly still a party without a leftwing.
